Consumer Compliance Outlook
News from Washington: Regulatory Updates
While not necessarily exhaustive, the following list of notices of final and proposed rule makings were recently released.
On March 21, 2008, the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision requested public comment on new and revised interagency questions and answers regarding flood insurance. The agencies are proposing new questions and answers, as well as substantive and technical revisions to the existing guidance, to help financial institutions meet their responsibilities under federal flood insurance legislation and to increase public understanding of the flood insurance regulations. Comments were due May 20, 2008.
On March 14, 2008, HUD released proposed revisions to RESPA to help consumers better understand their loan terms so that they can shop more effectively for mortgage loans. HUD's proposal is designed to improve disclosure of the loan terms and closing costs consumers pay when they buy or refinance their homes, providing homebuyers with more complete, accurate, and understandable information about their mortgages. Comments were due May 13, 2008.
On January 9, 2008, the Federal Reserve Board proposed and asked for public comment on changes to Regulation Z (Truth in Lending) to protect consumers from unfair or deceptive home mortgage lending and advertising practices. The rule, which would be adopted under the Home Ownership and Equity Protection Act (HOEPA), would restrict certain mortgage lending practices and would also require certain mortgage disclosures to be provided earlier in the transaction.
The proposal includes key protections for "higher-priced mortgage loans" secured by a consumer's principal dwelling as well as additional protections that would apply to all loans secured by a consumer's principal dwelling, regardless of the loan's APR. Additionally, the amendments would also ban seven deceptive or misleading advertising practices. Comments were due April 8, 2008. The Board is currently reviewing comments and working on a final rule.
On November 29, 2007, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued proposed regulations and guidelines to help ensure the accuracy and integrity of information provided to consumer reporting agencies and to allow consumers to directly dispute inaccuracies with financial institutions and other entities that furnish information to consumer reporting agencies. The proposal would implement §312 of the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act. Comments were due February 11, 2008. The agencies are currently reviewing comments and working on a final rule.
On October 31, 2007, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued final rules and guidelines for complying with §§114 and 315 of the Fair and Accurate Credit Transactions Act of 2003. The new rules require financial institutions to implement identity theft prevention programs and develop policies and procedures to assess the validity of a change of address that is followed closely by a request for an additional or replacement debit or credit card. The final rules also require users of consumer reports to develop policies and procedures to apply upon receipt of a notice of address discrepancy from a consumer reporting agency. Appendix J of the regulation includes guidelines to assist financial institutions and creditors in developing and implementing their programs.
The rules became effective January 1, 2008, and mandatory compliance is required by November 1, 2008.
On October 25, 2007, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued final rules and guidelines for complying with §214 of the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act (FCRA).
The final rules provide consumers with an opportunity to "opt out" before a financial institution uses information provided by an affiliated company to market its products and services to the consumer. These rules apply to information obtained from the consumer's transactions or account relationships with an affiliate, any application the consumer submitted to an affiliate, and third-party sources, such as credit reports, if the information is to be used to send marketing solicitations. Nothing in the final rules supersedes or amends a consumer's existing right to opt out of the sharing of nontransaction or experience information under §603(d) of the FCRA.
The final rules also implement the statutory exceptions to the affiliate marketing notice and opt-out requirement. The appendix to the final rules contains model forms to facilitate compliance with the notice and opt-out requirements.
The rules governing affiliate marketing became effective January 1, 2008. Mandatory compliance is required by October 1, 2008. Financial institutions should be developing plans to implement these new rules, paying particular attention to the overlap between these rules and existing information-sharing rules contained in the FCRA and in Regulation P, which implements title V, subtitle A of the Gramm-Leach-Bliley Act.
On August 31, 2007, the Department of Defense published the final rule that implements the consumer protection provisions of §670 of the John Warner National Defense Authorization Act for Fiscal Year 2007. The rule applies to all persons engaged in the business of extending certain types of consumer credit to active-duty service members or their dependents and their assignees and covers limitations and requirements for payday loans, motor vehicle title loans, and tax refund anticipation loans.
Effective October 1, 2007, the rule limits the military annual percentage rate (MAPR) to 36 percent and requires that certain disclosures be provided before the issuance of the covered transaction. The MAPR comprises all interest fees and charges, including those for single premium credit insurance and other credit-related ancillary products sold in conjunction with the covered transaction. Creditors that knowingly violate the rules may be subject to criminal penalties, and covered transactions not in compliance with the rule will be deemed void from inception.